Graduates of universities that are highly ranked or in developed countries earn much more than those coming from unranked institutions or institutions in developing countries. They are also more likely to become entrepreneurs, innovators or executives. Paolo Martellini, Todd Schoellman and Jason Sockin estimate the earnings that graduates from different universities around the world would earn if they all worked in the same labour market, drawing insights about the increasingly global market for top talent.

Skilled workers are vital for innovation and growth. Research shows that most inventors who file patents in the United States are university graduates, one-third coming from a small number of the country’s top higher-education institutions. Similarly, entrepreneurs and chief executive officers tend to be university graduates, particularly those at the top.

Policymakers and executives increasingly view attracting, cultivating, and retaining talent as some of their key functions. To achieve these objectives, it is important to identify who exactly are the skilled workers. One possibility is to focus on university graduates. However, universities vary widely in resources and capacity, so considering all graduates equally may overlook important distinctions. This concern is only heightened by the fact that for many types of skills and many decision-makers, the relevant talent pool is more global than local, and thus includes graduates of universities in different countries.

In a recently published article, we combine new data and empirical techniques to compare the knowledge and skills of graduates of different universities around the world. Our research uses the database of the web platform Glassdoor. Many users of the platform volunteer their CV as well as the details of their job and pay in return for information about the average pay or job satisfaction of their peers. The growing popularity of the site means that it provides a wealth of information from workers around the globe. We are able to study the earnings of 2.2 million workers over the last decade or so who graduated from 2,873 universities spanning 48 countries around the world.

Our idea is to compare universities based on the average earnings of their graduates. This captures the total labour market value of workers’ skills rather than how much they learned in university. It is the relevant measure for employers screening CVs or policymakers looking to attract high earners to their region or country. It would not be the appropriate measure for prospective students assessing which university might help them learn the most.

Comparing graduates across universities within one country is straightforward and builds on widespread practice, including in the UK. Comparing graduates of universities in different countries raises a number of subtle issues involving exchange rates and differences in national productivity. We use the fact that Glassdoor also contains data on how migrating among countries affects the earnings of more than 10,000 skilled workers. With these workers’ earnings, we are able to estimate how much each of the 2.2 million workers would earn if they all worked in the same labour market. We then rank universities based on these country-adjusted earnings.

Our approach yields several new insights about top universities. First, graduates of the top global universities earn substantially more than their peers. For example, graduates of the top 20 universities from the Center for World University Rankings earn 60 per cent more each year than graduates of unranked universities. Second, graduates of universities in developed countries earn as much as 50 per cent more each year than graduates of universities in developing countries — again, even after adjusting for the countries in which they work. Third, there are important exceptions to this pattern. Most notably, top universities in China and India, such as Peking University and the Indian Institutes of Technology, produce graduates whose earnings are among the highest in the world. On the other hand, many developing countries do not have even a single university whose graduates’ earnings are comparable to those from the top half of universities in developed countries.

The Glassdoor database also contains substantial data on migrants and their earnings that provides new insights into which countries gain and lose the most from migration flows of skilled workers. Whereas existing data count the number or the share of college-educated workers, we can go further and estimate the average earnings of each country’s skilled emigrants and immigrants.

Our findings reinforce the importance of brain drain for developing countries. Not only does a high share of college-educated workers emigrate from developing countries, but the workers who emigrate earn 50 per cent more than the college-educated workers who stay. On the other hand, emigrants from developed countries earn similar amounts to non-migrants in the host country.

We find large differences in the average earnings of college-educated immigrants, even in developed economies. Whereas the United Kingdom, Hong Kong, and the United States attract immigrants that out-earn domestic graduates by about 25 per cent, Italy, Saudi Arabia, and Denmark attract immigrants who earn less than domestic graduates. These differences suggest that migration and labour market policies interact to attract very different sets of workers, even among high-income countries.

Finally, we provide further evidence that skills are important above and beyond their effect on earnings. We connect the average earnings of a university’s graduates to the share of those graduates who go on to become entrepreneurs, innovators, or executives. Universities whose graduates earn more tend to have a larger share of graduates who file patents, who found or co-found their own firms, who become chief executive officers of large firms, and even who become Nobel laureates. These effects are sizable: for example, graduates of the top 20 universities are twice as likely to found or co-found a firm.

In summary, our research strengthens the view that skilled workers are essential for innovation and growth. We move beyond counting university graduates and instead estimate the earnings that graduates from different universities would earn if they all worked in the same labour market. Graduates of universities that are highly ranked or in developed countries earn much more than those coming from unranked institutions or institutions in developing countries. They are also much more likely to become entrepreneurs, innovators, or executives. All this is to say that policies that aim to better prepare high school students for university, to improve the quality of instruction at university, and to retain and attract the best students are even more important than we realise in the increasingly global market for top talent.

• This blog post is based on The Global Distribution of College Graduate Quality, Journal of Political Economy.
• The post represents the views of its author(s), not the position of the institutions where they work, LSE Business Review or the London School of Economics and Political Science.
• Featured image provided by Shutterstock.
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